Economic Outlook

World economic growth to pick up only gradually

Kiel Institute Economic Outlook World, Nr. 21 (2016 | Q3)

During the first half of the year global growth remained sluggish. While activity in emerging economies stabilized, growth in advanced economies softened. Over the next two years, we expect the world economy to pick up pace gradually, although without turning into a strong synchronized global upturn. World GDP at PPP exchange rates is set to expand by 3.1 percent this year, the same rate as in 2015. For next year, we continue to expect the world economy to grow by 3.5 percent; for 2018, we expect a further acceleration of global growth to 3.7 percent. Monetary policy remains accommodative in advanced economies and fiscal policy is getting more expansive. But structural impediments to growth as well as political uncertainty in the wake of rising protectionist and isolationist tendencies—as manifested, for example, in the UK’s decision to leave the EU—stand in the way of a more dynamic economic expansion. With commodity prices firming and China’s economy stabilizing, the outlook for many emerging economies has improved. However, we do not expect a swift recovery due to structural reasons as well as weak growth in advanced economies.